Surrender Endowment - pay tax??

MissScarlett_3

I have a paid up endowment policy (paid up Sept 05, matures July 2012) The surrender value is 11,180. If I surrender this policy will I be liable to pay tax on the sum. My OH is a higher rate tax payer, I am not, the policy is jointly held. The policy commenced July 1987 at 21.41 per month and was made paid up Sept 05 on the advice of a FSA. I understand now that the advice wasn't the best advice!

I do need the money but is it worth borrowing on the strength of it and keeping to maturity. It's a former Scot Am policy now Pru.

Anyone help please?

MissScarlett_3

Anyone please?

EdInvestor

Should be no problem as you've held it for 10 years.

MissScarlett_3

The surrender letter advises that if the policy commenced or was altered within the last 10 years then tax may be due.

It is the alteration part I was concerned with, we made both endowments fully paid up 3 years ago therefore is this not classed as an alteration?

As an aside - any comments on whether to keep it till maturity?.

Rabiddog_2

No making it paid up is not classed as an adjustment. IMHO its generally not worth keeping these things, as you have to compare the (notional) interest rate as compared to the actual interest rate (or growth potential) of an other investment (eg 8.5% in A&L account) or an ISA. Then again your tax and benefit situation may dictate that its better to keep it, at the present time. Brokers may be better placed to tell you its likely return. Or you could sell it on the Endowment trading Market (TEP)

MissScarlett_3

Is there a market for 'paid up' endowments, i thought not? The life insurance part no longer applies. OH's income is 53K gross, mine 19k and neither in receipt of benefits. Would the terminal bonus(if one was paid) make it worthwhile to keep or does making it paid up reduce that considerably.